Slovar Limited — Annual Report 2012

Aug 29, 2012

MONEY3 CORPORATION LIMITED
(ABN: 63 117 296 143)
PRELIMINARY FINAL REPORT
30 June 2012
APPENDIX 4E

Head Office:
Unit 4, 60-70 Mahoneys Road
Thomastown VIC 3074

Registered Office:
Level 1, 48 High Street
Northcote VIC 3070

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MONEY3 Corporation Limited
year ended 30 June 2012

COMMENTARY ON PRELIMINARY RESULTS FOR THE YEAR ENDED JUNE 2012

CEO and CHAIRMANS REPORT

On behalf of the board of directors of MONEY3 Corporation Ltd (Money3), it is our pleasure to present the Annual Report for end of financial year 2012(FY 2012).

2012 Financial Highlights:

• Revenue has increased by 15% to $15,494,893
• Profit after tax increased by 5.1% to $2,525,840
• Loan book has increased by 43.7% to 17,008,383
• Net assets increased by 9.5% to $33,436,731
• Net tangible assets per share increased by 4.5% to 37 cents

Operational activities

Money3 Corporation Ltd has 2 main focuses.

Money3 Branches

Money3 is a flexible and innovative provider of short term loans. Through our 34 branch network, Money3 provides credit to people who would not otherwise be able to access credit from mainstream lenders. Our key products are:

• Line of Credit
  loans from $50 to $1000 for 1 month
• Unsecure personal loans
  loans from $500 to $3000 for 3 to 12 months
• Cheque cashing
• International money transfer

This year included a thorough review of our business and the adoption of a detailed strategic plan. From that plan we have continued to expand our branch network with the addition of 10 new sites during the last financial year. Going forward we will be looking to expand our branch network into states where we lack presence. In Mid August 2012 we have opened our first store in Sydney and we plan to open several more in the next 12 months.

Through this branch network we are able to source leads for the auto division and in the car rental business 80% of all leads were sourced from the branch network. The branch network currently has in excess of 50,000 active customers.

M3 Auto Assist (Loan Centre and Car Leasing)

M3 Auto Assist contains all loans secured and provides the following products:

• Secured vehicle loans
  loans from $5000 to $35000 for 18 months to 4 years
• Car Rental
  vehicles valued from $3000 to $12000 for 2 to 3 years
• Micro Motor loans
  loans for $2000 to $5000 for 1 to 2 years

This division has emerged over the past couple of years from the demand we had from our existing customers but also from a number of sub-prime customers who couldn't access funds to acquire vehicle finance. As the division developed we have not only helped the sub-prime market but have been able to lend to the prime customers, as mainstream financial providers tighten their credit criteria. Over the next 12 months we plan on not only serving our existing customer base but also to move up the credit curve to serve customers who are finding it hard to access credit from major banking institutions.

Money3 expects to see some significant opportunity for growth in this area and therefore in mind is in the process of obtaining a finance facility to enable this growth to occur. The directors believe that going forward this part of the business will become the driving force of Money3.

Slow Debt

As predicted in last year's annual report bad debt would reduce. As a percentage of revenue bad debt has reduced from 13.77% in FY11 to 9.84% in FY12. This is as a result of two factors, first being better credit controls being put in place and second being the mixture of business moving more towards the secured car lending business.

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MONEY3 Corporation Limited
year ended 30 June 2012

System Upgrade

Over the last 2 years Money3 has been working on sourcing and implementing a new integrated IT platform. Challenging as the rollout of new systems can be we can report that we are within 2 months of having all branches on the new platform. All staff have been above reproach in their commitment to this game changing upgrade and not one customer or sale has been lost. This system used by many securitized lenders will enable Money3 to meet the growth objectives as projected in our strategic plan.

Regulation

Both Houses of Parliament have now voted in support of the Credit Enhancement Bill (2012) which is awaiting Royal Assent. As a result of strong industry consultation and thorough review and recommendations by the Parliamentary Joint Committee on Corporations and Financial Services and Senate Economics Legislation Committee workable and meaningful regulations will give certainty to the 'legitimate short term small amount lending industry' as described by Minister Bill Shorten.

From 1st March 2013 more responsible lending obligations will apply. Many of these obligations have been standard practice at Money3. We are pleased that the government has adopted many of our recommendations which will protect consumers from themselves and unscrupulous lenders.

Commencing 1st July 2013 caps on small amount credit contracts will apply. For loans greater than 15 days and less than 12 months and less than $2000 the permitted establishment fee will be 20% with an allowable monthly fee of 4% on the amount of credit provided.

For loans between $2000 and $5000 for a period less than 2 years the permitted establishment fee is $400 and an annual interest rate of 48% per annum on a daily reducing balance applies. For all other loans the cap on charges is 48% per annum on the daily reducing balance.

As Money3 has anticipated these regulations for a number of years the impact on its business will be minimal as it continues to shift further towards larger secured loans. Currently 70% of assets are tied up in secured loans above $5000 and return on these assets is not affected by the caps while the legislated caps on smaller loans will allow a sustainable business model.

Under this model the Money3 branch network is set to grow through acquisition as smaller providers, unable to remain viable under the new regulations, exit the industry.

The most pleasing aspect of the lengthy legislative process is the bipartisan political support that short term credit is expensive to provide and that there is legitimate place for small amount lenders to fill the gaps for people who need a temporary cash injection.

Dividends

On 30th August 2012, the directors declared a fully franked final dividend to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2012. The final dividend payable of 2.25 cents per share brings the full year dividend to 4.00 cents per share fully franked.

Management Team

Over the past 12 months the company has acquired two businesses, set up a new car rental division, opened several new branches and expanded our broker network. The Directors would like to thank all the time that the staff have put in over the past 12 months and would like to thank them in advance for the time they will put in over the next 12 months.

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MONEY3 Corporation Limited
year ended 30 June 2012

Outlook

Branch Expansion

Money3 have considered several acquisition and growth opportunities for the FY2013. We have opened 4 new branches (Campbelltown in August 2012, Sunshine, Prospect and Morphett Vale in July 2012) and have expanded our customer base organically and via acquisition. With the certainty around the new federal legislation and the difficulty of smaller credit providers to remain viable we will continue to open new branches organically and/or by acquisition.

M3 Auto Assist (secured lending)

As announced earlier negotiations are well underway for a substantial debt facility to fund the growth of the secured loans business M3 Auto Assist. M3 Auto Assist which contains the secured car loan and car rental business currently represents 70% of our assets. Systems, personnel and delivery channels are in place and ready to be ramped up. The debt facility will allow this business to grow to its potential.

Yours sincerely,

Geoff Sam OAM
Chairman
30 August 2012

Robert Bryant
Chief Executive Officer
30 August 2012

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MONEY3 Corporation Limited
year ended 30 June 2012

APPENDIX 4E

Preliminary Final Report to the Australian Stock Exchange

Name of Entity	Money3 Corporation Limited
ABN	63 117 296 143
Year Ended	30 June 2012
Previous Corresponding Reporting Period	Year ended 30 June 2011

Results for Announcement to the Market

		$	Percentage increase /(decrease) over previous corresponding period
Revenue from ordinary activities		$15,494,893	15.0%
Profit for the period from continuing operations		$2,525,840	5.1%
Total comprehensive income for the year		$2,530,223	5.5%
Profit from ordinary activities after tax attributable to members		$2,525,840	5.1%
Total comprehensive income for the period attributable to members		$2,530,223	5.5%
Dividends (distributions)	Amount per security		Franked amount per security
Final Dividend	2.25 cents		2.5 cents
Interim Dividend	1.75 cents		1.75 cents
Record date for determining entitlements to the dividends (if any)		12 October 2012
Brief explanation of any of the figures reported above necessary to enable the figures to be understood:For an explanation of revenue and profit from continuing operations, see commentary on results included in the accompanying preliminary final report.

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MONEY3 Corporation Limited
year ended 30 June 2012

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MONEY3 Corporation Limited
year ended 30 June 2012

Dividends

Date the dividend is payable	26 October 2012
Record date to determine entitlement to the dividend	12 October 2012
Amount per security	2.25 cents
Total dividend	$1,098,747
Amount per security of foreign sourced dividend or distribution	N/A
Details of any dividend reinvestment plans in operation	TBA
The last date for receipt of an election notice for participation in any dividend reinvestment plans	12 October 2012

NTA Backing

	Current Period	Previous corresponding period
Net tangible asset backing per ordinary security (cents per share)	37.0	35.4

Control Gained Over Entities Having Material Effect

Name of entity (or group of entities)	N/A
Date control gained	N/A
Profit / (loss) from ordinary activities after tax of the controlled entity since the date in the current period on which control was acquired.	N/A
Profit / (loss) from ordinary activities after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period.	N/A

Loss of Control Gained Over Entities Having Material Effect

Name of entity (or group of entities)	N/A

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MONEY3 Corporation Limited
year ended 30 June 2012

Details of Associates and Joint Venture Entities

Name of Entity (or group of entities)	N/A

Foreign Entities Accounting Framework

| For foreign entities provide details of which accounting standards have been adopted (e.g. International Accounting Standards)
N/A |
| --- |

Audit/Review Status

| This report is based on accounts to which one of the following applies:
(Tick one) | | | |
| --- | --- | --- | --- |
| The accounts have been audited | ☑ | The accounts are in the process of being audited | |
| If the accounts are subject to audit dispute or qualification, a description of the dispute or qualification: N/A | | | |

Attachments Forming Part of Appendix 4E

Attachment #	Details
1	Statement of Comprehensive Income
2	Statement of Financial Position
3	Statement of Changes in Equity
4	Statement of Cash Flow
5	Notes to the Preliminary Final Report
Signed By (Director/Company Secretary)
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Print Name	Craig Harris
Date	30 August 2012

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MONEY3 Corporation Limited
year ended 30 June 2012

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012

	Consolidated	Consolidated
	2012	2011
	$	$
Revenue from continuing operations	15,494,893	13,513,713
Other Income	100,350	-
Expenses from operating activities:
Administration	784,576	668,478
Employment	6,055,981	4,809,849
Advertising	637,620	369,845
Occupancy costs	1,409,533	1,093,915
Bad debts	1,525,728	1,861,352
Depreciation & amortisation	543,535	257,653
Communication	338,130	256,955
Legal and professional	520,642	422,266
Finance Costs	166,736	185,308
Profit before income tax	3,612,762	3,588,092
Income tax expense	(1,086,922)	(1,185,822)
Profit for the year from continuing operations	2,525,840	2,402,270
Other comprehensive income:
Exchange gain/(loss) on translation of foreign operation	4,383	(4,125)
Other comprehensive income for the year net of tax	4,383	(4,125)
Total comprehensive income for the year	2,530,223	2,398,145
Profit attributable to:
Owners of Money3 Corporation Limited	2,575,091	2,458,458
Non-controlling interest	(49,251)	(56,188)
	2,525,840	2,402,270
Total comprehensive income attributable to:
Owners of Money3 Corporation Limited	2,579,474	2,454,333
Non-controlling interest	(49,251)	(56,188)
	2,530,223	2,398,145
Earnings per share
Basic earnings per share (cents)	5.87	7.11
Diluted earnings per share (cents)	5.76	6.91

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MONEY3 Corporation Limited
year ended 30 June 2012

The statement of comprehensive income is to be read in conjunction with the attached notes.

STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012

	Consolidated 2012 $	Consolidated 2011 $
ASSETS
Current assets
Cash and cash equivalents	1,256,406	4,790,715
Trade and other receivables	9,880,749	8,251,132
Other	430,011	71,111
Total current assets	11,567,166	13,112,958
Non current assets
Trade and other receivables	7,127,634	3,587,888
Other	186,203	154,195
Property, plant & equipment	2,714,595	1,677,439
Intangibles	15,363,487	15,351,487
Deferred tax assets	496,198	398,947
Total non current assets	25,888,117	21,169,956
Total assets	37,455,283	34,282,914
LIABILITIES
Current liabilities
Trade and other payables	1,105,409	835,992
Borrowings	1,590,469	1,521,058
Current tax payables	791,027	797,899
Provisions	379,409	194,791
Total current liabilities	3,866,314	3,349,740
Non current liabilities
Trade and other payables	82,500	280,500
Provisions	69,738	85,253
Borrowings	-	42,945
Total non current liabilities	152,238	408,698
Total liabilities	4,018,552	3,758,438
Net assets	33,436,731	30,524,476
EQUITY
Issued capital	28,902,114	26,701,073
Reserves	26,463	24,140
Non-controlling interest	(66,190)	(16,939)
Retained earnings	4,574,344	3,816,202
Total equity	33,436,731	30,524,476

The condensed balance sheet should be read in conjunction with the attached notes.

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MONEY3 Corporation Limited
year ended 30 June 2012

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012

CONSOLIDATED
	Issued Capital	Retained Earnings	Reserves	Non-controlling interest	Total
	$	$	$	$	$
At 1 July 2010	22,726,416	2,210,054	514,301	-	25,450,771
Total comprehensive income for the year	-	2,458,458	(4,125)	(56,188)	2,398,145
Transactions with owners in their capacity as owners:
Issue of shares	4,153,729	-	-	-	4,153,729
Transaction costs arising for share issue	(255,817)	-	-	-	(255,817)
Deferred tax asset due to transaction costs arising for share issue	76,745	-	-	-	76,745
Non-controlling interest on incorporation of subsidiary	-	-	-	39,249	39,249
Employee share options -value of employees service	-	-	13,964	-	13,964
Transfer of lapsed options	-	500,000	(500,000)	-	-
Dividend paid	-	(1,352,310)	-	-	(1,352,310)
Closing balance as at 30 June 2011	26,701,073	3,816,202	24,140	(16,939)	30,524,476
At 1 July 2011	26,701,073	3,816,202	24,140	(16,939)	30,524,476
Total comprehensive income for the year	-	2,575,091	4,383	(49,251)	2,530,223
Transactions with owners in their capacity as owners:
Issue of shares	2,283,416	-	-	-	2,283,416
Transaction costs arising for share issue	(117,679)	-	-	-	(117,679)
Deferred tax asset due to transaction costs arising for share issue	35,304	-	-	-	35,304
Employee share options -value of employees service	-	-	8,920	-	8,920
Transfer of lapsed options	-	10,980	(10,980)	-	-
Dividend paid	-	(1,827,929)	-	-	(1,827,929)
Closing balance as at 30 June 2012	28,902,114	4,574,344	26,463	(66,190)	33,436,731

The statement of changes in equity is to be read in conjunction with the attached notes.

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MONEY3 Corporation Limited
year ended 30 June 2012

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2012

	Consolidated	Consolidated
	2012	2011
	$	$
Cash flows from operating activities
Net fees and charges from customers	13,819,298	11,596,425
Payments to suppliers and employees	(10,242,851)	(7,993,021)
Interest received	91,643	55,935
Interest paid	(166,736)	(185,308)
Income tax paid	(1,155,741)	(921,772)
Net cash provided by operating activities	2,345,613	2,552,259
Cash flows from investing activities
Payment for property, plant and equipment	(1,580,692)	(422,906)
Net funds advanced to customers for loans	(4,750,175)	(2,451,173)
Proceeds from purchase of business	98,662	-
Payments for purchase of business	(12,000)	(40,000)
Net cash used in investing activities	(6,244,205)	(2,914,079)
Cash flows from financing activities
Transactions with non-controlling interest	-	39,248
Proceeds from share issue	1,895,325	3,703,169
Repayment of hire purchase borrowings	(6,435)	(9,824)
Proceeds from borrowings	32,901	301,654
Dividend paid	(1,557,508)	(1,157,467)
Net cash provided by financing activities	364,283	2,876,780
Net (decrease)/increase in cash held	(3,534,309)	2,514,960
Cash and cash equivalents at the beginning of the year	4,790,715	2,275,755
Cash and cash equivalents at end of the year	1,256,406	4,790,715

The statement of cash flows is to be read in conjunction with the attached notes.

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MONEY3 Corporation Limited
year ended 30 June 2012

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

INTRODUCTION

The preliminary final report covers Money3 Corporation Limited and its controlled entities. This report is based on financial statements that are in the process of being audited.

NOTE 1. Basis of preparation of preliminary final report

This preliminary financial report does not include all of the notes of the type normally included in an annual financial report. This preliminary final report has been prepared in accordance with the measurement and recognition requirements of Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Accounting Interpretation and the Corporations Act 2001.

The accounting policies and methods of computation adopted in the preparation of the preliminary financial report are consistent with those adopted and disclosed in the company's annual financial report for the year ended 30 June 2012 and the half year ended 31 December 2011.

NOTE 2. Revenue

| | Consolidated 2012
$ | Consolidated 2011
$ |
| --- | --- | --- |
| Continuing operations: | | |
| Revenue from operating activities | | |
| Loan fees and charges | 14,019,376 | 12,427,569 |
| Cheque cashing fees | 797,538 | 775,344 |
| Rental services | 404,393 | - |
| Other | 181,943 | 254,865 |
| | 15,403,250 | 13,457,778 |
| Revenue from non-operating activities | | |
| Interest income from financial institutions | 91,643 | 55,935 |
| | 15,494,893 | 13,513,713 |

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MONEY3 Corporation Limited
year ended 30 June 2012

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 3. Expenses included in net profit/(loss) from continuing operations

	Consolidated 2012 $	Consolidated 2011 $
Profit before income tax has been determined after:
Other Income:
Discount on acquisition	100,350	-
Employment:
Salary and employee benefits expense	5,132,993	3,980,140
Share based payments	8,920	13,964
Contributed superannuation	478,708	386,345
Other employment costs	435,360	429,400
Total Employment costs	6,055,981	4,809,849
Depreciation and amortisation:
Leasehold improvements	113,965	88,002
Motor vehicles	15,856	27,650
Furniture, equipment and fittings	225,647	142,001
Rental assets	188,067	-
Total depreciation and amortisation	543,535	257,653
Operating lease
Rent	968,172	790,698
Finance costs (a)
Interest on bank overdrafts and loans	157,904	179,866
Interest on obligations under finance lease	8,832	5,442
Total finance costs	166,736	185,308

(a) The weighted average interest rate on funds borrowed generally is 11.3% p.a. (2011: 10.5% p.a.)

NOTE 4. Contributed equity

	Consolidated 30 June 2012		Consolidated 30 June 2011
	shares	$	shares	$
Issued and paid-up ordinary share capital
Balance at the beginning of the financial year	42,849,811	26,701,073	31,708,374	22,726,416
Issued during the year:
Issue of shares to public at $0.366 each	-	-	10,659,153	3,943,886
Issue of shares to public at $0.38 each	5,263,158	2,000,000	-	-
Share issue costs	-	(117,679)	-	(255,817)
Deferred tax credit	-	35,304	-	76,745
Issue of shares to employees at $0.405 each	2,469	1,000	-	-
Issue of shares to employees at $0.38 each	31,584	12,002	-	-
Issue of shares to employees at $0.37 each	-	-	40,545	15,000
Issue of shares on DRP	686,179	270,414	441,739	194,843
Balance at end of financial year 30 June	48,833,201	28,902,114	42,849,811	26,701,073

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MONEY3 Corporation Limited
year ended 30 June 2012

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 5. Trade and other receivables

	Consolidated 2012 $	Consolidated 2011 $
Trade receivables		17,842,969
Allowance for doubtful debts		(834,586)
		17,008,383
Current receivables		9,880,749
Non-current receivables		7,127,634
Total receivables		17,008,383

Trade receivables have been aged according to their original due date in the below ageing analysis, including where repayment terms for certain long outstanding trade receivables have been renegotiated. The carrying value of trade receivables after allowance for doubtful debts is considered a reasonable approximation of fair

NOTE 6. Segment information

A segment is a component of the consolidated entity that engages in business activities to provide products or services within a particular economic environment. The consolidated entity operates in one business segment, being providing financial services specialising in the delivery of small cash loans, personal loans, cheque cashing, equipment and motor vehicle rental, and international money transfer. The launch of the rental products may develop into a separate segment, this will be assessed in regards to its significance to the company. Currently the rental products are not a significant segment. The board of directors assess the operating performance of the group based on management reports that are prepared on this basis. Although the group has established operations in Singapore during the year these activities are not significant and therefore no geographical reporting has been included.

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